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Comment by toomuchtodo | Hacker News Reader

> I hope this gets rid of the "out-raise your competitors and spend ridiculous amounts of money on ridiculous money sinks" strategy forever.

I don't think so. We live in a world now where incredible amounts of capital are chasing returns because of zero and negative interest rate policies. The only solution will be regulation.

EDIT: The more interesting question (IMHO) is what happens when all of that capital has nowhere to go? Is there back pressure? How do accumulators of capital react to such forces?

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The giant pool of money is consumed by a desperate hunger for any shred of return it can find, and there is an almost limitless supply of smart, creative people who are well-positioned to capitalize on that.

By contrast, there is a finite supply of regulators, and the people who make the laws that the regulators implement are themselves members of the cadre of hungry ghosts who make up the giant pool of money.

With conditions like those, regulation will be doing extremely well to only be 10 or 20 steps behind the market.

> and there is an almost limitless supply of smart, creative people who are well-positioned to capitalize on that.

There are smart and creative people, but those are not the people being provided with capital to execute (see: WeWork, Uber, and most other VC unicorns burning out their runway). But, to your point, definitely right regulation needs to catch up. Fingers crossed it happens before the pitchforks come out [1]. Remember, those who hold vast amounts of the world's wealth are a vocal minority [2]. The same holds for the size of groups with exceedingly high wealth in developed countries [3].

[1] https://www.theatlantic.com/business/archive/2017/02/scheide... (The Only Thing, Historically, That's Curbed Inequality: Catastrophe)

[2] https://www.vox.com/future-perfect/2019/1/22/18192774/oxfam-... ("42 million people, or 0.8 percent of the world’s population, have net worths in excess of $1 million. That group — roughly the global 1 percent — controls 44.8 percent of the world’s wealth. So it really is true that a pretty small number of people control nearly half the world’s wealth. It’s just a bigger small number of people than Oxfam’s reports tend to emphasize.")

[3] https://en.wikipedia.org/wiki/List_of_Americans_by_net_worth (The Forbes 400 Richest Americans list has been published annually since 1982. The combined net worth of the 2019 class of the 400 richest Americans was $2.9 trillion, up from $2.7 trillion in 2017. As of October 2019, there were 621 billionaires--a record high--in the United States.)

> The giant pool of money is consumed by a desperate hunger for any shred of return it can find, and there is an almost limitless supply of smart, creative people who are well-positioned to capitalize on that.

The finite regulators are confronted with a very small supply of smart, creative people in a position to capitalize. That group is the opposite of almost limitless, it's scarce.

Why can't regulators easily handle the dozens of deals per year that are of particular significance in VC-money terms? Nothing drastic needs to be done to regulate that scale of deals better, it's not that large in quantity. We're not talking about tens of thousands of very large funding rounds per year, that isn't going to happen.

In a nutshell, because the USA is a capitalist society that's governed by rule of law.

So regulators don't get broad power to approve or deny any business deal based on ad-hoc decisions about whether they think the deal will ultimately be a net positive for the economy 10 years down the line. They get much narrower powers to protect against a specific set of things as laid out in whatever laws comprise their job description. And Congress doesn't usually get involved until after there's already a big smoking crater surrounded by a bunch of upset people.

And don't think that the supply of "smart, creative people in a position to capitalize" is limited to the CEOs of unicorns or anything like that. The supply is actually the total number of entrepreneurial-minded people with an idea and a desire for some capital to help get it off the ground. And the scope of ideas is not limited to silicon valley startups. I'm talking about people the pool of money could throw its funds at, not the (much smaller) set of people it has thrown its funds at in the past, or the (even smaller) set of those people who get bashed in the news.

Yes completely agree. It's hard to get a firm grip on just how deeply unequitable society is today, and how little the big tech corps contribute in taxes.

"JSavageOne 7 hours ago [–]

Corporatocracy is probably the more accurate term, but the term neofeudalism isn't exactly a huge stretch. The only real difference today is that at least in theory a serf can become a lord, but the same power dynamic remains. When chattel slavery ended many of the freed slaves became sharecroppers, bound to the land by eternal debts that could never be repaid. Although they were no longer legally bound to their "masters", for many their lives were not really any better.

Although in principle the monopolies and the government are separate institutions, we all know that the reality is that our politicians are bought out by the corporations, and the regulators are staffed by ex-employees of the very companies they are supposed to be regulating. We used to bust monopolies, but since the 70s or so the regulators have become very lax, and practically every industry has become more consolidated than it's ever been (finance, advertising, airlines, utilities, telecom, agriculture, healthcare, etc).

What's interesting to me is that whenever Google/Facebook does something authoritarian that would seem to violate some principle of liberty we deem sacred (eg. censorship, violating freedom of speech), many if not most of the comments seem to rationalize the corporation's decision as exercising their own free speech. But when you're Reddit with 430M monthly active users, your userbase is the population equivalent of the world's 3rd largest country, and so you're effectively the equivalent of a nation-state. When you're Amazon with 750k employees, then your employees could fill up a city.

Does the principle of democracy only apply to country's governments, or does it also extend to corporate monopolies?" [1]

[1] https://news.ycombinator.com/item?id=23218895

Historically, you just buy land. As much as you can find, in as great a quantity as you can find.

IMO land is a horrible investment to sit on, they have acquisition costs, you have to pay annual rates to hold them, they're non revenue generating that as a result can't be claimed as a tax deduction (in Australia at least). They've also been depreciating in value lately, not a great short-term investment.

Better to invest into the Stock Market index until another opportunity opens up.

Depends on the jurisdiction - if there's no CGT, and prices have been trending upwards, then the increase in value dramatically offsets any rates you may pay.

Of course, the upward trend in prices relies on a bigger fool coming into your market, which of late has been Chinese money.

Localized power brokers like hospital systems and universities address this by being slum lords and slowly acquiring properties in areas of interest.

In many urban environments you’ll see blighted property adjacent to hospitals, etc that is essentially a buffer for future clearance.

It’s a win-win, the institution makes money (at arms length) on the slumlording, and they get incentives to “revitalize” the area when they need a new building.

Illinois Medical District on the southwest side of Chicago just off of I-290 is a prime example of this.

https://en.wikipedia.org/wiki/Illinois_Medical_District

Or stocks. Plain old classic stocks of established companies. S&P 500 historically is depending on which Google result you trust 4-8% per annum, it's hard to beat that on long term - on short term it usually is as many VC and other funds have proven but essentially that's casino bets.

> We live in a world now where incredible amounts of capital are chasing returns because of zero and negative interest rate policies. The only solution will be regulation.

The counter and historically more persuasive argument from the left is that the falling rate of profit will lead to more war and colonization. It’s hard not to see what’s happening in Yemen and the Saudi’s investment in SoftBank through this lens.

I haven't encountered this argument before. Could you expand on this a bit? Or point toward some articles on the topic? Thanks!

Not OP, but they might be alluding to the fact resource scarcity often leads to war

The argument dates back to Marx. Marx explicitly (already in the Communist Manifesto) argued that as capitalists run out of new markets to conquer, competition will force them to find their savings elsewhere, and that would inherently mean lowering costs of raw materials or lowering manufacturing costs, and that this this ultimately leads to conflict over property rights and driving down labour costs. He further predicted that this eventual pressure to drive down labour costs would push capitalism into a series of worsening crises on the assumption that driving down labour costs would drive down the market, and leave the market with over-capacity, and so intensify conflict.

Basically Marx assumption was to take capitalists on their word that the free market will drive profit margins towards zero, coupled with the assumption that a lot of people have a lot of vested interest in preventing their profits from going towards zero and will do almost anything to prevent that from happening.

That people still peddle this Leninist garbage is just unbelievable to me.

Saudi have been fighting off and on with the people of that region of 500+ years. Now they have more money. They have always tried to influence what going on there. What is happening there is part of a larger conflict between Saudi/US and Iran as well. How it related to falling interest rates or whatever is beyond me.

And SoftBank simply has to do with the Saudis knowing that Oil money will go away and they are not capable of correctly reorganizing their state, so they think they can just buy stock to finance their nonsense government polices in the long run.

All of this is explained 100x better with an incompetent government that happens to sit on natural resources, rather then some Marxist critic of Capitalism.

> Saudi have been fighting off and on with the people of that region of 500+ years.

The Saudi nation-state did not exist 500 years ago and the regional conflicts have more to do with the recent history of British and American imperialism in the region than any ahistorical, Orientalist casting of eternal conflicts in the Middle East. Should we understand the Nazi's assault on Britain primarily through the lens of Saxon raiding during the Middle Ages?

> And SoftBank simply has to do with the Saudis knowing that Oil money will go away and they are not capable of correctly reorganizing their state, so they think they can just buy stock to finance their nonsense government polices in the long run.

This is literally a vulgar form of the Leninist argument?

I didn't not claim that the modern war was directly related to some historical deterministic path. Just that regional power trying to control other weaker regional powers is not at all new in Arabia.

It is pretty much standard politics that happens during all political systems, and thus can not be blamed on some theory of capitalist overproduction.

While the Saudi state didn't exist 500 years ago, the roots Saudi power is older then 1744.

My point was more that influence politics in the region is very old and thus any explanation that is derived from some set of economic relations that exist now can not explain most of it.

> This is literally a vulgar form of the Leninist argument?

Leninist argument is about Capitalism, where based on the Marxist theory of over production countries go out to expand the market for their product. They have to do this because on Marxist cycle theory, capitalist production leads to overproduction, and then those products can fall in price so much that there is no more profit, so you need to find new markets.

First of all, this does not apply to Saudi Arabia because that cycle theory really doesn't make much sense for their economy. Saudis do the opposite where the artificially limit the production at all times, so their is no element of a market over-producing constantly.

Saudi does not go to Yemen to buy raw resources, turn them into product and sells them back to the Yemeni, that is how Lenin envisioned it.

If you wanted to make a Leninist type of argument, even if doesn't really fit, you could argue that Saudis invade Yemen so Yemenis had to buy their product. However that makes no sense as Yemen does not consume much oil and are a marginal costumer.

Really the point here is that all these things have been explained 100x better by academc of economics and political science but instead people keep repeating 100 communist propaganda and apply it to ever situation even if it is pretty far removed from the theory of those communists.

Whatever you think of it, this "Leninist garbage" predates Lenins birth by several decades. It's a central thesis of Marx, not Lenin.

And Marx' did not see crises driven by chasing profit as somehow anything unique to capitalism or a criticism, but a general pattern of economic development under any system that growth continues until the growth under a given mode of production gets to a point where further growth challenges the limits of the system and leads to crises that eventually drives change to the system. There's no value judgment in Marx views on that - he saw it as a natural cycle.

If you want to try to apply that, whether you agree it has validity or not, to the Saudis, they are now constrained by the limits of their resource extraction, and trying to address that and continue growth is forcing them to try to convert from a semi-feudal economy where the top layers are all driven by resource extraction, land ownership and patronage, towards a more capitalist economy. The problem they are facing is how to transition their wealth while staying in power, and that creates a dynamic that will be changing based on how secure they feel their position is, and to what extent they are successful in shifting their base of power away from resource extraction.

Why would you want to regulate it? Consumers benefit from VCs subsidising Uber and food delivery.

The collateral damage is immense, to both gig workers and in the case of food delivery, restaurants who do the actual work of making the food.

EDIT: I mean, just go UBI instead of advocating for siphoning sovereign fund dollars from ruthless dictators and unsophisticated investors like Masayoshi Son. Save us all the paperwork and bikeshedding about not being able to afford what we clearly (based on central bank monetary policy) can afford. I will certainly miss the Matt Levine pieces about these folks though.

Nobody is forced to work for Uber and the like, restaurants can also ban these services.

This is a tired argument. We live in a society, not Somalia. Government exists to regulate to protect citizens, and I'm starting to believe these arguments are put forth to give these monstrosities more time before death gasps.

> not Somalia

I'm curious why you would choose this example. Is somalia a country without a society ?

This is laughable, since the government also created an artificial taxi monopoly that benefitted no one but a small subset of people.

Uber is a godsend to millions of people and drivers around the world, to say otherwise in order to drive your political agenda it’s akin to living under a rock.

And if you want some proof, just ask every Uber driver if they would be sad or happy if the service disappeared tomorrow and hear their answers. There is a world out there that lives and thrives thanks to companies like Uber.

Uber is artificially starving out the markets it enters by offering dumping prices. Restaurants are similarly dragged into participating at gunpoint (in particular, the likes of DoorDash, Yelp and GrubHub will absolutely hold the restaurant's reputation hostage until it joins the platform).

Wrong. Uber made the market bigger and a result to that there are more people overall working for the transportation industry. It’s not like every Uber driver would have been a taxi driver if Uber didn’t exist..

Of course it made the market bigger, because it forced the competitors to lower prices to unsustainable levels. Lower prices = more demand = more supply = bigger market. For now.

It's also true that the more fast neutrons hit your fissile matter, the more energy you can extract faster. Yet it doesn't make an atomic bomb work as a viable power source.

But doing so is a classic Prisoner's Dilemma in the short term - if you don't acquiesce to Uber Eats delivery fees, but your competitors do, who captures the market share? Even if it isn't fruitful for them in the long term, it shafts you in the short term.

How restaurants suffered? I mean if restaurants were so unable to cooperate to set up their own delivery service to compete against the VC funded ones, then they were already well destined to go out of business.

(And I'm not saying the state shouldn't step in, because these are the typical pathological market states that need some intervention.)

Delivery services have monopolized many peoples restaurant ordering habits. Many restaurants have their own delivery service, but people don't use it because they order from grubhub/doordash/uber eats instead. If the restaurants take themselves off the services people don't order from them anymore.

So it turns people value UX and simplicity than restaurant diversity. And I'm not exactly blaming them. Restaurants' own ordering/delivery systems all usually suck.

People value TV ads and newspaper articles/PR, and they value new things.

Is that really true everywhere?

Where I live, we have these services, but I don’t see huge push of Grubhub/DoorDash/Uber. If anything, restaurants are all setting up their own ordering platforms.

So do the locusts benefit from all the free food all these farmers have neatly planted close together.

The article is from 7 years ago, but it nicely describes the consequences of the larger "sharing economy" that we're experiencing now: https://www.ribbonfarm.com/2013/04/03/the-locust-economy/.

Uber's sales pitch was always "We're going to charge artificially low prices for a while in order to crush the competition, and, once we achieve monopoly status, we'll start jacking prices up." It's hard for me, as a consumer, to see what they're doing as a benefit to me in the long term.

Given that that's the basic business strategy behind all of these hyper-capitalized startups, I have similar suspicions around food delivery companies. As it stands, I'm guessing that it's affecting me more immediately, too, as restaurants raise their prices in order to cover whatever large cut the GrubHubs and DoorDashes of the world are taking. Similar to how everything's just 5% more expensive now to cover the money that's being skimmed off of every transaction in the form of credit card fees that have been justified to consumers with the promise that they'll give 1/5 of what they took back to you in the form of "rewards".

>> what happens when all of that capital has nowhere to go? Is there back pressure?

Perhaps what happens is that expensive (i.e., in terms of fees) investment vehicles end up investing in easily available assets (e.g., Uber stock, which is public.)

Anyone know if SoftBank earns carry on this part of the portfolio? Why would LPs want SoftBank to have any funds in a publicly traded asset and pay fees for that?

> The only solution will be regulation.

What's the problem exactly, and how would regulation work to address it?

I feel that people gravely misunderstand capital, interest rate, and so on. Capital accumulation is not the same as expanding the money supply (so taking out a loan) - even if both are somehow denominated in USD. If we have too much financial capital - as you pointed out, chasing returns - that just means its real value depreciates compared to other things. (Eg. capital goods, labor, return generating assets, etc. - That's why we see asset bubbles, and investment in a lot of ventures, that then pays huge salaries.)

But it doesn't matter how much money chases how little, the important thing is the real growth, aggregate demand (total compensation), technological change (productivity), and so on.

There's back-pressure (falling profits, slowing growth, recession, depression, shrinking economy, rising unemployment, a vicious cycle), but also there's always a place for financial capital to go. Namely there are always new ideas to try, there are always things to invest in.

For example, there are always more riskier and more longer term investments, such as education (lending people money to retrain and switch to a higher paying job - a bit like student loans, but a lot more like coding bootcamps). Infrastructure (public transport, energy, housing), and so on.

Profit (real capital) comes from economic surplus, and that comes from technological change (economies of scale, efficiency, etc). And fundamentally it seems advanced economies are very resistant to switch to more efficient forms. ( http://www.vitalsigns.mtc.ca.gov/time-spent-congestion --- and it took a pandemic to try to make home office really viable; see also how much money people spend on healthcare, yet how inefficient it is)

Without real economic surplus a bigger money supply is just inflation. (That's why some people freak out when they see central banks doing quantitative easing, but they forget that central banks look at inflation, and they do QE to keep inflation above 0.)

So eventually, either we invest in big changes to go up the efficiency ladder, stagnate, or worst case the promised new projects don't deliver (because there was not enough aggregate demand to subscribe/buy/rent/use the new shiny thing, or it was not green enough, so it was not a good market fit), eventually the financial sector starts to run out of equity to risk, and we fall into the debt trap that caused Japan's lost decade.

(And that's why central banks all around the world are able to just foot the bill, because it doesn't cause inflation as long as that money is basically just gets rolled over into new loans/bonds/etc. most of it goes nowhere.)

Eventually it will be inflated away. Someone has to pay the piper.

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